Mysterious Magic Leap lands $793.5 million in mega-funding round

CEO of Magic Leap Rony Abovitz at a groundbreaking event in October for Magic Leap’s new office in Plantation. The 260,000 square-foot facility is the tech company’s new headquarters. Carl Justecjuste@miamiherald.com

CEO of Magic Leap Rony Abovitz at a groundbreaking event in October for Magic Leap’s new office in Plantation. The 260,000 square-foot facility is the tech company’s new headquarters. Carl Justecjuste@miamiherald.com

Magic Leap’s future is coming into focus, as a historic mega-round of funding could sharply accelerate its path to commercialization.

The secretive South Florida technology company working on a computing platform that simulates reality has raised $793.5 million in a new round of venture capital financing led by Chinese e-commerce giant Alibaba Group.

In the largest funding round of its kind, Magic Leap’s Series C investors also include Warner Bros., Fidelity Management and Research Co., JPMorgan Chase & Co. and Morgan Stanley Investment Management, Magic Leap said Tuesday. Existing investors Google, which led a previous funding round of $542 million in late 2014, and Qualcomm Ventures also participated. Alibaba Executive Vice Chairman Joe Tsai will sit on Magic Leap’s board, joining Google CEO Sundar Pichai.

The latest round pushes Magic Leap’s total funding to almost $1.4 billion. The funding will give Magic Leap a post-money valuation of $4.5 billion – that’s for a company that has yet to reveal its technology to the world.

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“This funding allows us to accelerate the move from product development to pilot manufacturing, manufacturing and commercial launch,” said Magic Leap founder and CEO Rony Abovitz, in a phone interview Tuesday morning. “But beyond that, this gives the company a very long-term runway – effectively we can be sustainable. We may not need to raise capital again – it doesn’t mean we won’t – but it gives us the ability to think well beyond the initial product launch.”

We may not need to raise capital again – it doesn’t mean we won’t – but it gives us the ability to think well beyond the initial product launch.

Rony Abovitz, founder and CEO of Magic Leap

It also brings Magic Leap a strategic partner in Alibaba, which will help introduce Magic Leap's technology to the Chinese market and the more than 400 million people using Alibaba's platforms.

“We invest in forward-thinking, innovative companies like Magic Leap that are developing leading products and technologies,” said Tsai, in a statement. “We believe Alibaba can both provide support to and learn from such a partner, and we look forward to working with the Magic Leap team.”

Abovitz called Alibaba his “first-choice strategic partner,” adding that “Google re-invested in this round significantly so we will have a great Internet company in the West and a great Internet company in the East helping us fulfill our mission of creating the next computing platform.”

Magic Leap, a company Abovitz founded a few years ago in the proverbial and literal garage, is currently headquartered in Dania Beach and is building a massive facility in Plantation. The company is developing a computing platform that will enable people to seamlessly combine and experience their digital and physical lives, said Abovitz on Tuesday, without revealing specifics about the technology.

“We want the digital world to bend to your physical life, your real emotional life as a person, and we don’t want you to bend to computers,” he said. “We are forcing our technology to fit people’s lives the way it was before computing. I think of this as a conceptual computer, a computer based on context and awareness that will help you be more intelligent. It will make you smarter, not a machine, and it will deliver an Internet of presence and experience rather than just data.

“Computing today is like watching a shark on an iPhone, but when you are snorkeling you are experiencing it in the present, it is really there. We want to do that on the tech side,” added Abovitz, who grew up snorkeling and scuba diving in Florida. “We want this to bring you joy and emotion, experiences that you may never be able to have.”

Calling its technology “mixed reality,” a combination of virtual and simulated reality, the company is reportedly creating a wearable device, perhaps a headset, that would use a type of light-field technology to simulate 3-D images superimposed on the real world by projecting patterns of light to the eye. It is different from Facebook’s Oculus or Microsoft’s HoloLens, Magic Leap says.

As an example, Abovitz said the technology will bring film, games and books to life like never before, but it will also allow you to buy a must-have pair of Italian shoes, bringing the runway in Milan to you.

“All this means we have had to invent and create a lot of new technologies, some of which we will be mass fabricating here in our factory in Plantation; others we will be fabricating in our supply chain around the world.”

Abovitz has not yet disclosed when its first product would be hitting the market and few outside the Magic Leap family have seen the technology – which is highly unusual for a tech company attracting this range of venture capital. Likening it to how artists or film directors deliver their creations to the world, or even to the Beatles, his favorite band, Abovitz said the world will be happy it waited to see the finished product.

“I’m a big believer in really putting our heart and soul into the product, crafting it so that when we do launch it is finished and it is great. .. It should be like the Beatles making Sergeant Pepper and then they drop it ... The public got to hear Sergeant Pepper in its full glory and that was really fun ... Hopefully in our own way we will do something along those lines.”

Although funding rounds have been getting larger, this size round is historic for a company at this stage. Nikhil Krishnan, tech analyst with CB Insights, a data-analysis firm that closely tracks the venture capital industry, said Magic Leap's round of $793.5 million is the largest Series C round that CB Insights has tracked, with the next largest being $500 million rounds raised by Wish and Zenefit. For some context, the median Series C size since 2010 is $12 million, he said. This is also by far the biggest investment in the nascent but growing AR/VR space, bigger than the last four quarters of investment into the space combined, Krishnan added. All this and “Magic Leap doesn't have a commercial product yet to launch, and has been pretty much stealth about what's happening within the company,” he said.

Also highly notable is the funding group Abovitz has assembled, Krishnan said. In its previous round, Magic Leap assembled a group from all different industries, including venture capitalists such as Obvious Ventures and Andreessen Horowitz; corporations such as Google and Qualcomm Ventures, financial institutions and even film companies such as Legendary Entertainment.

“This was already a group of some of the top investors in their respective fields,” said Krishnan. “This new round of financing was led by Alibaba, providing a good entry for the technology into foreign markets. Warner Bros also participated, fortifying a strategic partnership that will help bring them into studios, and a host of crossover investors with deep pockets that can finance these types of large rounds, Wellington Management, T. Rowe Price, Morgan Stanley, etc.”

Alibaba has invested in about five U.S. startups a year since 2013, according to CB Insights data. Alibaba Chairman Jack Ma said last year that the company would fund U.S. tech startups and help them expand to China.

While most tech companies doing what Magic Leap is attempting would likely be in Silicon Valley, Magic Leap is headquartered in Dania Beach and moving its team to a 260,000-square-foot facility under construction in the former Motorola facilities in Plantation. Magic Leap, which also has locations in Silicon Valley’s Mountain View as well as Santa Cruz, Los Angeles, Seattle, Austin, the United Kingdom New Zealand and Israel, employs about 500 people with more than 200 in South Florida. Local and state governments last year approved $9 million in economic incentives to create 725 jobs with an average salary of $100,000 by 2020. Abovitz, a University of Miami alum who studied biomedical engineering, co-founded the pioneering robotics firm Mako Surgical in Davie, which was sold to Stryker for $1.65 billion in 2013.

“We are setting up our facility in Plantation, we’re hiring, and I currently expect that to be the primary hub of the company although we are setting up centers of excellence built around the U.S.,” said Abovitz. “We really want the greatest brains in the world, creative and technical, and we are also going where these brains are and setting up these centers of excellence. Think of it as a core planet, which is here, and satellites around it.”

We are setting up our facility in Plantation, we’re hiring, and I currently expect that to be the primary hub of the company.

Rony Abovitz, founder and CEO of Magic Leap

In Plantation, the company will do pilot production runs, but also will be manufacturing parts for Magic Leap’s commercial shipments.

“We hope we will be part of reinvigorating the Florida and U.S economy. We are believers in that – that’s going against the grain, but we think that’s the right thing to do,” Abovitz said.

Noting Magic Leap’s group of long-term investors, Abovitz said, “You don’t change computing in one day, it’s something you do with great collaborative partners. ...Now it’s heads down for us and we will be accelerating everything. We are super focused on our getting first product out and getting it right, and letting it speak for the company. We know we have to deliver against high expectations.”